Moneyfacts’ average mortgage interest rate has fallen below 5% for the first time since September.
Moneyfactscompare.co.uk financial expert Rachel Springall explained: “Borrowers will no doubt be pleased see mortgage rates dropespecially the millions who need to get rid of a cheap fixed interest rate before the year is out. It is a notable milestone to see the average Moneyfacts mortgage rate fall below 5%, although it remains uncertain how long this can be sustained.”
It’s been over a month since interest rates last fell below 5% (September 3 – 4.99%). Before then, interest rates had not fallen below 5% since September 2022. Mortgage rates escalated in the wake of the infamous ‘mini-budget’, with Moneyfacts’ average mortgage rate breaching the 5% mark just a week later. The situation for borrowers looking for a new deal only got worse when interest rates rose above 6% in October.
Springall pointed out that continued uncertainty in the wake of the ‘mini-Budget’ not only led to a rise in interest rates, but lenders withdrew hundreds of deals.
The closest comparison to such unrest was felt as a result of the COVID-19 pandemic and the UK lockdown. To further trouble consumers, inflation rose to double digits and the Bank of England’s base rate rose to 5% at the end of June 2023. As a result, Moneyfacts’ average mortgage interest rate once again exceeded the 6% limit.
Fast forward to today, mortgage rates are much lower thanks to base rate cuts and swap rate moves. However, ongoing inflation makes it less likely that the Bank of England’s Monetary Policy Committee will unanimously agree on further cuts. Furthermore, uncertainty remains over what will be announced within the budget. That said, fixed rate mortgages do not always bend to the will of base rate cuts, but are instead more intrinsically linked to the swap rate.”
NAEA Propertymark president Mary-Lou Press commented: “It is extremely positive to see a much more competitive lending market than just twelve months ago. Consumers have faced a two-sided challenge in recent years, with increased inflation and higher base interest rates.
“While we have seen three cuts to the base rate throughout the year, affordability has remained a challenge for many. All eyes will be on the Bank of England on Thursday when the next base rate decision is made.”